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24 November 2017

Indonesia: House speaker’s arrest raises political risks

On 19 November, Setya Novanto – the speaker of the House of Representatives (DPR) – was transferred from hospital to a Corruption Eradication Commission (KPK) detention centre following his arrest as a suspect in the e-KTP corruption scandal.

The high-profile politician’s appeal for legal protection from the president will likely fall on deaf ears, as Jokowi seeks to distance himself from his embattled ally. Yet Novanto’s fate is far from sealed, not least because of the political fallout that his prosecution threatens.

More lives than a cat

Novanto is accused of orchestrating the siphoning of USD170 million from a government scheme to issue electronic ID cards in 2011. The fact that the KPK has (twice) named him a suspect in the e-KTP corruption case, and subsequently arrested him, is an encouraging step forward for due process. Indonesia is categorised as high risk in our Corruption Index and the highest echelons of the political elite often seem to avoid official scrutiny. However, the legal case against Novanto still has a long way to run and there is no guarantee that he will face trial, let alone be held to account for any crimes he may have committed.

The 62-year-old is an archetypal political insider and has a solid record of dodging similar allegations. Notably, in 2015, he was accused of trying to extort USD1.8 billion in shares from Freeport’s local unit in return for securing a contract extension for the US miner to operate the Grasberg copper mine. Although the ‘Papa wants shares’ scandal forced Novanto to resign as DPR speaker, an official investigation fizzled out, he retained his position as an MP and was reappointed speaker less than a year later.

Novanto has adopted a multi-faceted approach to avoid questioning in relation to the e-KTP case, from ignoring KPK summons on the grounds of ill health through to utilising pre-trial motions to have his suspect status rescinded on technicalities. Another avenue that Novanto looks keen to exploit is a dubious claim of immunity from prosecution as a high-ranking member of the DPR. Although such a provision exists under the Legislative Institutions Law (MD3), our understanding is that this immunity does not extend to ‘crimes of an extraordinary nature’, including corruption. The judiciary is, however, highly susceptible to outside influence and anything is possible.

Important ally for President Jokowi

President Jokowi has said that Novanto should “follow legal proceedings” following his arrest and issued a thinly veiled criticism by calling for more “ethical politics” in a speech on 20 November. However, this rhetoric should not deflect from the important role that Novanto – a consummate political operator – plays at the heart of government.

The fact that the Jokowi administration enjoys broad support in the DPR is in no small part down to the fact that Novanto acts as an effective bridge between the executive and legislature. Indeed, it is worth remembering that the president lobbied hard to get the scandal-prone politician elected as Golkar boss amid factional infighting back in 2016. It was no coincidence that the second largest party in the DPR switched its support from the opposition to the governing coalition shortly after Novanto’s accession.

Political fallout threatens to distract from policymaking

These latest corruption allegations could well cost Novanto his dual posts as Golkar chairperson and DPR speaker, even if only temporarily. At the very least, his resignation or removal from the speakership would trigger a bout of political jockeying for advantage within the DPR that will distract from already glacial lawmaking. For example, it would likely prove a death knell for any lingering hope of the long-stalled oil and gas bill making it into law anytime soon.

Meanwhile, a Golkar leadership election could result in a faction that does not support the president winning out. There is every chance that the party might seek to switch its allegiance back to the opposition Red-White Coalition under such circumstances (or at a minimum threaten to do so) and perhaps encourage other parties whose support is wavering to follow suit. Although not a foregone conclusion, defections from the ruling coalition would give the political opposition additional momentum as Indonesia heads towards election season; the defeat of the president’s ally in the Jakarta gubernatorial election in April already gave it a much needed shot in the arm.

Indonesia is categorised as low risk in our Government Stability Index in 2017-Q4 and we fully expect the Jokowi administration to finish its term as scheduled in October 2019. Nevertheless, managing the fallout from the aforementioned political machinations would sap time and energy, and divert attention away from policymaking.

Outcome far from certain

There is no doubt that investigating Novanto’s role in the e-KTP scandal is a key test for the judiciary and the KPK in particular. If a figure as powerful and well connected as Novanto were to face justice for his alleged crimes, it would make Indonesia’s elites think twice before participating in this kind of egregious graft.

Yet the case is a grey swan that could see many more politicians across the political spectrum implicated. Even the highly respected anti-graft agency might be wary of pulling too hard on this thread, particularly since the KPK is facing attack on multiple fronts and risks becoming a victim of its own success.